New Tax Exemption for the 2016 Filing Year

A tax exemption is an allowable deduction for each person within your household that is considered to be an allowable exemption. That would mean, yourself, your spouse and each dependent child, or qualifying relative. An exemption allows you to reduce the amount of tax owed.

This year, for the 2016 filing season, this tax exemption amount is $4,050 per person, which is $50 more than in 2015.

You will need to provide a Social Security number for each person who qualifies for the exemption. Without a valid SS# for each person, the IRS could deny the exemption claimed.

How to Claim the Tax Exemption:

How you claim an exemption on your tax return depends on which form you file.

Form 1040EZ filers. If you file Form 1040EZ, the exemption amount is combined with the standard deduction and entered on line 5.

Form 1040A filers. If you file Form 1040A, complete lines 6a through 6d. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 26.

Form 1040 filers. If you file Form 1040, complete lines 6a through 6d. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 42.

You lose your personal exemption amounts completely when your adjusted gross income is $216,900 and you are a married taxpayer filing separately; $381,900 as a single filer; $407,850 as head of household; and $433,800 as a married couple filing a joint return.

Phaseout of the Tax Exemption

You lose at least part of the benefit of your exemptions if your adjusted gross income (AGI) is above a certain amount. For 2016, the phaseout begins at the following amounts.

Filing Status

Adjusted Gross Income
Level That ReducesExemption Amount

Married filing separately

$155,650

Single

259,400

Head of household

285,350

Married filing jointly

311,300

Qualifying widow(er)

311,300

This means that if your adjusted gross income exceeds the above amounts for the filing status that you are using, then you must deduct your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero.

Note: When planning for next year’s 2017 filing season the exemption amount is due to stay the same at $4,050 per allowable exemption.

Of course we are always here to help you make sense of your exemption status. Call us today to schedule your tax preparation for the 2016 Tax Filing Season, 740-374-6942.